THE CURMUDGEON CHRONICLE - #259

THE CURMUDGEON CHRONICLE ©

AN IRREVERENT VIEW

Time Line: March 21, 2009
Date Line: Flemington New Jersey

The power to tax is the power to….

After the protestations that we are a country of laws how can our legislators consider passage of a tax that singles out recipients of ill-advised bonuses?

I use the term ill-advised purposefully: if the payments were unlawful the Government could recover them readily. If they are not illegal then an ex post facto law disguised as a tax is not a proper or constitutional method for recovery. The Constitution guarantees equal protection under the law to all citizens; it outlaws Bills of Attainder and the taxing power is not intended to be, (or used as), a catch-all weapon to void those guarantees for people whose conduct we do not like.

We fought a revolution over “abusive” tax policies of the British Crown. Are we to become the archetypical abusers of the power to tax our citizens? We are one of the world’s few major powers where failure to pay taxes is deemed a crime punishable by confiscation of property and imprisonment. We share that distinction with Russia.

If we believe that bonuses paid during the current banking mess are either a civil wrong or illegal and therefore recoverable, there are courts and judges to deal with the issues. We are, (after all), a country of laws.

To safeguard our individual interests we must not let Congress use the taxing power to achieve a result that is morally and legally questionable. If we are against torture we must also condemn this unlawful use of the power to tax for the purpose of confiscation.

Based on the media’s coverage what I am told is:
A] These payments were not possible in the legislation that enabled the loans to AIG until shortly before passage;
B] The Treasury Department requested changes in the language which in turn permitted the payments;
C] The Congressional Committee acceded to the request; the legislation got out of committee in amended form and was adopted;
D] The bonuses were paid as Treasury and the Congress knew they would.
E] The facts became public and now Congress screams for someone’s blood.

In a country of laws a negligent person bears the burden of his acts. No one has suggested that Congressmen or Senators be taxed for negligence or laxity. We know how that tax would fare in a floor vote.

The individuals who got the bonuses did their managements’ bidding: they kited the assets, fiddled with the numbers and their managements said, “Great! That is what they were hired to do”).

If the bonus recipients are guilty of civil or criminal misconduct, hale them into court and the law will get the bonuses back for the public purse. I hope that happens without a trumped up tax adopted as CYA legislation to be enforced by the IRS sitting as a kangaroo court. A recovery sought through use of the US Court system would guaranty a speedy resolution, saving the administration further embarrassment. I feel comfortable predicting quick settlement since from the defendants’ point of view avoiding the legal fees makes a 90% payback a substantial victory.

The pilgrims of Wall Street learned a lesson from our forbearers. “Early settlers do best in the long run”.

Howard Stamer